What's Happening

By Lydia Kuykendal
Mercy Investments

February 6, 2024, Adrian, Michigan – Last year, shareholder health work focused on intellectual property protections for branded drugs. Specifically, it sought to clarify the relationship between pharmaceutical company patenting and access strategies. 

That work continues, with the Portfolio Advisory Office filing resolutions at five pharma companies – Eli Lilly, Gilead Sciences, Johnson & Johnson, Pfizer, and Merck. Several regulatory changes over the past year will impact this issue, and we hope that companies see these second-year proposals as a way to prepare for these coming changes.

First, the Inflation Reduction Act (IRA) empowers the federal government to negotiate some drug prices. Some have argued that it enacts significant patent reform, specifically around the issue this proposal seeks to understand. This comes from a critical provision of the IRA that states the only drugs that qualify to be considered for price negotiations are drugs with no generic competition, thus discouraging extended patent exclusivities. Additionally, three bills addressing patent reform passed out of the U.S. Senate Judiciary Committee in 2023 and, if passed, would impact pharma companies’ current practices.

In addition to the continuing work on patents, the Interfaith Center on Corporate Responsibility (ICCR) health group has started a workstream around the right to health. This is a human right: the right to the highest attainable standard of physical and mental health, as defined by the World Health Organization. Access to medicines is a critical component of the right to health. 

Target 3.8 of the United Nations’ Sustainable Development Goal 3 assesses progress toward “access to safe, effective, quality and affordable essential medicines and vaccines for all.” The UN Special Rapporteur on the Right to Health has made clear that states and pharmaceutical firms share the responsibility for increasing access to medicines and recommends that firms “should adopt a human rights policy statement which expressly recognizes the importance of human rights generally and the right to the highest attainable standard of health in particular.”

However, a quick look at drug pricing shows that U.S. pharmaceutical companies are not supporting this right. An analysis by the Rand Corporation concluded that U.S. prices for branded drugs were nearly 3.5 times higher than prices in 32 Organization for Economic Co-operation and Development (OECD) member countries. A study by the Kaiser Family Foundation found “prescription drug costs to be an important health policy area of public interest and concern.”

Shareholder proposals at Eli Lilly, Bristol Myers Squibb, and Pfizer seek to understand whether the business model of pharma companies may pose human rights risks. The current business model of the pharmaceutical sector, which in many instances prioritizes profitability over patient health, often infringes on these rights. Given pending legislation in the European Union that would mandate human rights due diligence as called for in the UN guiding principles, companies undertaking human rights due diligence will be ahead of the curve. 

International human rights organizations have recognized the human right to health for decades. Drug manufacturers have a responsibility to operationalize a business model that promotes this right worldwide. If, as all companies in this industry state, patients are indeed the most essential part of their business, this should be an achievable task.